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Colorado state legislators continue to deal with 2011-12 budget issues

Written by Marianne Goodland, Legislative reporter

If you ever wanted to know why it’s important to have a legislator from eastern Colorado on the Joint Budget Committee, look no further than the deals made on the 2011-12 budget.

Among the package of bills designed to help balance the 2011-12 budget: repeal of HB 10-1195, which last year lifted a decade-old exemption on agricultural compounds, bull semen and pesticides. Repealing the 2010 legislation was the line in the sand for JBC member Rep. Jon Becker, R-Fort Morgan. And he also negotiated a lower cash transfer from a severance tax fund, an agreement that he said will preserve at least $10 million and maybe more for water projects.

Last year’s HB 1195, the legislation dealing with the ag sales tax, was intended to raise $3.7 million for the state in both 2011-12 and 2012-13, and would then be repealed on July 1, 2013. However, last Tuesday’s deal eliminates the 2.9 percent sales tax as of July 1. Under the budget agreement reached last week, a bill already moving through the House on the ag tax will become part of the budget-balancing package.

HB 11-1005 is sponsored by Rep. Jerry Sonnenberg, R-Sterling, and has been stalled in the House for several weeks while the 2011-12 budget was being worked out. The bill unanimously passed the House Agriculture, Livestock and Natural Resources Committee on Jan. 31 but ran into trouble with Democrats on the House Finance and House Appropriations committees. That signaled that the bill was likely in trouble once it reached the Democrat-controlled Senate.

However, the budget deal means that HB 1005 now becomes part of the budget-balancing package, largely because Democrats on the JBC didn’t want to sponsor bills that would repeal 2010 legislation. (A second bill in the budget package, HB 1293, would repeal the 2010 legislation eliminating a tax exemption on certain software purchases.)

HB 1005 will need some tweaking to conform to the budget agreement; as it currently sits in the House, it would have gone into effect upon the governor’s signature, which meant the tax would have been repealed earlier than July 1.

Becker referred to himself in a Tuesday JBC meeting as “the new, new member who raised his hand at the wrong moment,” but his efforts on the ag tax exemption and on ensuring funding for water projects is earning him kudos among his Republican colleagues.

“He was phenomenal in the process,” Sonnenberg said Wednesday, April 6. And Sonnenberg backed up his praise with action; at Becker’s request, Sonnenberg added Becker as a co-primary sponsor of HB 1005. The bill got preliminary approval from the House on Friday.

In the Senate, HB 1005 will be carried by Sen. Greg Brophy, R-Wray, who also gave the freshman legislator high marks for his work on both the ag tax and the water funds.

“For the border communities,” this is really important, Brophy said of the ag tax repeal. “We have businesses out there losing market share strictly based on the collection of this 2.9 percent sales tax. It’s really important that we pass this bill.”

For the big picture, Brophy said, the amount that the bill will cost the state is akin to “a rounding error in a $7 billion (general fund) budget. I’m still infuriated that they even took away that exemption on inputs used in manufacturing. No one else pays sales tax on inputs used in business!”

Brophy said that repealing the sales tax is also symbolically important. “There’s a lot of other inputs” in ag, such as diesel fuel or fertilizer, and once the Legislature establishes that they can go after a tax exemption, they won’t stop there, he said. Once it gets to diesel fuel, for example, “then you’re talking about really big money.”

Brophy lauded Sonnenberg and especially Becker for making sure HB 1005 would pass. “Jon ensured that the money was there for the ag tax exemption, and he also made sure we put (millions more) into water projects. We cannot continue to fall behind in developing our water infrastructure.”

Becker “did a great job, and he’s a freshman! We have a great team,” Brophy said.

Of course, none of these accomplishments came alone. It didn’t hurt that the 2010 legislation on tax exemptions were unpopular with Republicans from the start; not a single Republican legislator voted in favor of them last year. Once Republicans took the majority in the House for the 2011 session, bills to repeal the so-called “dirty dozen” flew from Republican legislators’ pens, although so far most of those bills have landed with a thud in the Senate.

Democrats, in addition to refusing to sponsor the tax repeal bills, also have complained that the revenue that would have come from those taxes are coming out of the budgets of the state’s public schools, and the dollars are instead going to special interests. But despite their objections, most Democrats say they will vote for the budget deal, and that means voting for HB 1005.

With the money that got to stay in the perpetual base account of the severance fund, Becker has now brokered two deals for funding water projects this year. Earlier in the session he worked out a deal with the Department of Natural Resources that would put at least $6 million into water storage projects, money that will come from the Division of Wildlife.

Becker noted that the 2011-12 budget deal will reduce the size of the cut for K-12 education, from the $332 million proposed last February by Gov. John Hickenlooper to $250 million. “We took less of a cut in K-12,” he said, and “that’s good for rural schools. I hope they can be efficient without laying off teachers.”

As to the repeal of the ag sales tax, Becker said he believes that will be a huge help for dairies in eastern Colorado and for all of the agriculture industry. “This is a huge win,” he said.

Becker is the first rural legislator to sit on the six-member panel since Republican Rep. Brad Young of Lamar was on the panel for the 2002 and 2003 sessions. Being a freshman on JBC is a challenge; only once in the past decade has that job fallen to another freshman legislator, and that was Rep. Bernie Buescher, D-Grand Junction, in 2005.

“We thought long and hard when (JBC) was offered to me,” Becker said this week. “I wanted to be on the agricultural or business committees. But I felt I could do more good for eastern Colorado on JBC, which deals with the entire state budget.”

For example, the JBC decides the fate of the Department of Agriculture budget, and this year Becker has voted against increasing fees for the ag industry. “I’ve done more good (on JBC) than anywhere else,” he said.

“The voice eastern Colorado now has on the budget is enormous,” he said. And Becker said it also is a privilege to be part of JBC and to work on the 2011-12 budget. “It’s an honor to have been part of this. I’m privileged to protect my district and rural Colorado, and we’re getting a more responsible budget.”

Another plus of having a rural legislator on JBC: “You have five other members who now understand” more about rural Colorado. “The rural voice is important on JBC,” Becker said. “I’m happy with the budget but am trying to make it better.”

Final budget figures are not yet available and those final numbers are predicated on passage of the budget-balancing package that accompanies the annual Long Appropriations Bill, plus the two bills that deal with the repeals of 2010 sales tax legislation. Currently, the 2011-12 state budget is estimated at about $18 billion. Of that, about $7 billion is estimated to come from general funds, which is made up of sales and use taxes and corporate and personal income taxes.

The Long Bill, the 19 bills in the budget-balancing package and the School Finance Act all passed the Senate Appropriations Committee on Thursday, April 7. All were debated in the full Senate on Friday and were scheduled for final votes this week. The package will then move to the House, and the budget should be on Hickenlooper’s desk by April 29.